The auto industry which registered an impressive
growth of 68 percent during the current financial is among those large
scale manufacturing industries which are said to be the leaders of the
rally of economic growth in Pakistan.

It is however yet to be analyzed how much of the
growth in production and sales of the auto industry contributed to the
national economy and what share it repatriated to the principal
companies for import of cars in CKD form.

Actually, it was the financial policy of providing
access of the consumers to the banking and other financial system which
allowed car financing facility to the individuals as well as the
corporate sector which proved really a pushing factor in the growth of
the auto sector. The cheaper rate of mark up was another factor which
helped tremendous growth in the auto sector.

Despite expansion in production capacity, the
phenomenal growth in demand for car, however, created a gap between
demand and supply causing delayed deliveries, increase in prices and
premium as well on almost all the latest models launched by different
automobile assemblers including Suzuki, Toyota, Corolla, Daihatsu, Dewan
Motors and Honda Motors.

Taking advantage of delayed delivery which ranges
from 4-12 months encouraged the profiteers to make money by asking
premium of Rs50, 000 to Rs150,000 on different models.

Taking note of the situation, the Minister for
Production Liaquat Ali Jatoi has recently announced that the yawning gap
between demand and supply is not only causing delayed delivery of cars
but also provide leverage to the automobile industry and the middlemen
to skin the buyers through charging exorbitant prices.

The minister said that he has strongly recommended to
the cabinet to allow import of cars so that upward trend in car prices
and the issue of delayed delivery could be addressed amicably.

It may be mentioned that despite repeated persuasion
for bringing down the prices, the car assemblers had increased prices of
all models. In case of Honda the prices increase is said to be Rs20,000
on each unit, Toyota has closed down advance booking because it has
already been overloaded and is facing a shortfall of 60,000 in supply.
It is being sold at a premium of Rs1,75000 per unit. The trend of price
increase is reflected in the premium of Rs70,000 on the recently rolled
out model of Cuore model of Daihatsu.

According to an estimate a huge fund to the tune of
Rs50 billion is said to be stuck up with the auto sector due to delayed
delivery of the cars. Under this situation, the Ministry of Production
is considering allowing import of reconditioned cars and a decision in
this regard may be announced in the forthcoming federal budget, the
minister told a recent meeting organized by the business community in
Karachi. The production minister also indicated that in a bid to clear
the backlog, import of Chinese, German and French Models would also be
allowed which is expected to create an atmosphere of healthy competition
and reduction in ever rising prices of the automobiles.

The auto sector, it may be mentioned, has played a
significant role in the economic development of the leading economies in
the West as well as in the Asia. It is the auto sectors which help the
Japanese economy assume a leading role through the world. Though the
industrial base in the auto sector was smaller in Pakistan, yet it can
do a magic provided the assemblers were asked to operate within the
framework of the deletion program which is lagging behind the schedule.
In fact, the growth in auto sector does not reflect in the vendor
industry which is suffering from stagnant growth because a large portion
of the accessories and spares used in car assembling are provided by the
principal offices.

The auto sector in Pakistan is also assuming
significant role, the growth should be used for developing vendor
industry which would ultimately help addressing the problem of
unemployment by creating opportunities for the unemployed.

So far Pakistan has not entered into the export
business of the automobiles because of limited production base which not
sufficient to meet the local requirement. It is the time to ask the
foreign assemblers to enhance the production base and make amendments in
the agreements so that Pakistan could also enter into export regime of
the automobile especially in the huge market available in the Central
Asian and African countries which offer a huge market for the auto
sector.

There were enquiries for import of cars from
different countries but since the auto sector is unable even to meet the
local demand and facing a gap of over 10,000 in demand and supply, the
economy could not benefited from such exporter orders. It is expected
that following the implementation of WTO rules from January 1, 2005, the
prices of car may come down automatically in the face of arrival of
cheaper models of vehicles from different car producers especially from
China where the auto sector is operating on the economy of the scale
bringing the car prices even to the level of motor bikes, it is said.